Tuesday, May 16, 2006

South Texas Has Nations Worst Credit

A report on the credit conditions in south Texas. "Here's a Top 10 ranking San Antonio could do without: Bexar County, along with four other South Texas counties, made the nation's list of places where residents have the lowest credit scores. The San Antonio, Brownsville, McAllen, Corpus Christi and Laredo areas had average credit scores below 600 in 2004, according to a study by the Brookings Institution. Lenders consider a sub-600 score the riskiest credit rating."

"The dubious distinction stems from reasons including thin credit files, low rates of medical insurance, and even failure to pay health club dues. From there, finances just keep going downhill. 'Without a doubt, consumers with those scores are paying more for credit cards,' said Greg McBride."

"The report should be a wake-up call, experts say. 'In a quiet, Brookings way, they are saying, 'Yikes! Something must be done,' said Ed Mierzwinski, consumer advocate at the Texas Public Interest Research Group."

"In the Brookings study, Bexar County dropped from 613, in 1999, to 597, which carries a 'D' rating, the lowest credit score. Nationwide, scores dipped from 661 to 655 during the same period. But the local area declined four times as much as the rest of the country. 'What sets San Antonio apart is this fairly dramatic drop in credit scores,' said Matt Fellowes."

"Some lenders question how the scores are generated. For instance, a big factor in the low credit scores is unpaid medical bills, lenders say. South Texas may suffer from a higher level of unpaid bills because of the high percentage of uninsured residents. Removing medical claims can generate a more accurate measure of whether a borrower will repay a loan, said Carolyn Ozcan, Fannie Mae communications director."

"'A lot of times, when you take medical claims out of the picture you see a willingness to pay on everything else,' Ozcan said. 'Not paying your medical bills on time is not a measure of whether you will pay your mortgage on time.'"

"San Antonio's steady but slow growth in home prices also may have contributed to the drop. 'On the East and West coasts, people could count on property values going up 20 percent after just one year, and so could hide their financial problems by selling their houses and using the cash to pay off debts,' said Gregg Stanley, owner of Real Estate Foreclosures. 'San Antonio didn't see that level of appreciation.'"

"As a result, South Texans were stuck with more delinquent mortgages. In the Brookings study, mortgage delinquencies were 3.3 percent in Bexar County in 2004 compared with 1.4 percent nationwide."

2 Comments:

Not to pick on south Texas or San Antonio, but I thought some readers may be unfamiliar with the region. This is also why I am skeptical about out of state 'investors' buying in SA.

The only reason SA has 26% uninsured is welfare. The closer you get to the Rio Grande, the worse it gets. On the border, 80-90% of the population relies on the government for medical care. These are the poorest counties in north America.

As they say, sometimes there is a reason the houses are cheap, especially for 'America's sweatiest city.'

Investing in San Antonio borders on criminal lunacy. You're right about the poorest counties in America. They are similar to the Appalachian area in West Virginia, the Sioux Reservation in South Dakota, perhaps parts of Mississippi and Alabama and rural New Mexico. They pay more for credit cards????? Why do they have them at all?